Thursday's Market: Stocks End on a Cheery Note as Dow, Nasdaq Both Move Higher

Despite a negative morning note on the PC industry, the market found a way to ease higher.
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Remember the good ol' days, when the

Nasdaq Composite Index

would trade in a nice, safe, 600-point range and the

Dow Jones Industrial Average

would move like Marshall Faulk after a triple espresso?

Well, try and remember -- because today, markets were rather calm. And quiet, just as they have been for most of this post-holiday, pre-2001 period. The Dow closed the day coasting off its session highs, floating lower as volume stayed thin. It finished up 66 to 10,869 on the strength of financials and manufacturing, while the Nasdaq offset big losses in large-cap tech with broad gains in a ton of smaller issues. The Comp finished just north of breakeven.

Value investing -- that is, investing in anything except tech -- has come back in a big way. And

J.P. Morgan

(JPM) - Get Report

has been a big beneficiary lately. Morgan's probably the most rate-sensitive of the Dow's three financial components, and with the

Federal Reserve

quite likely to cut rates by at least 25 basis points in January, the brokerage has been flying. Today, it added 8 to the Dow's gain.

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Meanwhile,

IBM

(IBM) - Get Report

was looking good, looking damn good.

Prudential Securities

trimmed Big Blue's revenue estimates this morning, cutting its fourth-quarter revenue figs to $24.5 billion from $25.3 billion, citing weak software and PC sales.

Wit Soundview

, in response, reaffirmed its ratings and rushed to IBM's defense.

Investors stuck their fingers in their ears, shook their heads from side to side and closed their eyes, yelling, "We can't hear you! We can't hear you." Simply put, IBM was rubber and Pru was glue, so whatever they said sent IBM up 56 cents to $85.25 nonetheless. Insert raspberry here.

In fact, the only really terrible Dow dogs were the Nasdaq's biggest names --

Intel

(INTC) - Get Report

and

Microsoft

(MSFT) - Get Report

. Mister Softie and Mister Chips were indicative of the market mood, with both adding a combined 21 to the Dow's downside as investors shun large-cap tech.

Sun Microsystems

(SUNW) - Get Report

,

Cisco

(CSCO) - Get Report

and

JDS Uniphase

(JDSU)

were all off more than 4%.

Now despite the fact that large-cap tech performed about as well as the attention-deficit addled troublemaker in a second-grade class play, other tech plays have been nuanced and focused performers. Like Seann William Scott from

Dude, Where's My Car?

Err. Maybe not.

eBay

(EBAY) - Get Report

, which recently announced it will be advertising on television for the first time ever, rose 7.3% to $37.81 today. In fact, the online auctioneer of everything from used sweatsocks to Playstation 2 consoles selling for quadruple retail list price, is up close to 40% in the last five trading sessions alone.

Juniper Networks

(JNPR) - Get Report

was another close-to-40%-gainer over the last five sessions. It rose 8.3% to $138.63 today.

Overall, the Nasdaq's issues were feeling the Juniper and eBay vibe. Most of the four-lettered issues weren't cursed and forced to spend the day in the red. No, the majority were in the green, with 2,601 stocks positive vs. 1,486 stocks negative.

So, look. The plusses are overcoming the minuses. Look at

ePlus

(PLUS) - Get Report

, which rose 56.4% to $12.16 after telling Wall Street it will be (gasp) exceeding estimates due to higher margins and lower expenses. Ah, so

that's

how it works!

Not everything was so nice today, though.

Nice Systems

(NICE) - Get Report

, for example was not too, well, nice. Today, the Israeli company fell 61.1% to $17.50, losing half its market cap, after warning that slower IT spending would force it to miss its earnings forecast.

Railroads got railroaded today -- for lack of a better pun.

Union Pacific

(UNP) - Get Report

announced that 2,000 employees will be taking the last train out of town, warning that earnings won't come in as good as expected. The company will take a 26-cent charge in its fourth quarter, while it restructures to save some money.

As a result, (and taking a cue from that Ralph Wiggum boy) investors weren't choo-choo-choosing to but Union Pacific or any of its railroad friends. Union Pacific fell 4% to $50.50, while

Burlington Northern Santa Fe

(BNI)

fell 2.4% to $28.44, while

CSX

(CSX) - Get Report

fell 2.6% to $26.06.

But don't hang that striped conductor's hat in shame. These railroaders have been doing rather well lately. Most of the major names in the industry are trading not far from 52-week highs because those recovering tech-addicted day traders have become mild-mannered earnings aware bargain hunters. The low price-to-earnings ratio of the railroads was quite delectable back in October, when these guys began their ascent.

Elsewhere in the we-haul-crap industry,

UPS

(UPS) - Get Report

, known as United Parcel Service to the brown-socked employees who deliver packages, announced that it would raise its rates. Starting Feb. 5, the company will hike rates 3.7% for one-, two- and three-day deliveries while raising ground delivery rates 3.1 percent. International export rates will go up 2.9%. And all those fuel-related surcharges will still stay in affect.

Now, market watchers were expecting UPS to hike rates. Not really a surprise there, since the deliverers always bump up prices at the end of the year. And just the other day,

FedEx

(FDX) - Get Report

raised its rates, but did far more so than UPS. It hiked domestic rates by 4.9%. International rate increases were bumped 2.9%, exactly what UPS did.

UPS gained 3.3% to $59.19, while FedEx was pretty flat. And while we're here, let's just take a big ol' look at the transports, like those battered railroads and the postal people. The

Dow Jones Transportation Average

fell xx%.

Market Internals

Good breadth. Mediocre volume.

New York Stock Exchange: 2,101 advancers, 832 decliners, 1.02 billion shares. 368 new 52-week highs, 51 new lows.

Nasdaq Stock Market: 2,601 advancers, 1,486 decliners, 2.15 billion shares. 169 new highs, 294 new lows.

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Most Active Stocks

NYSE Most Actives

  • Lucent Technologies (LU) : 39.3 million shares.
  • AT&T (T) - Get Report: 25.1 million shares.
  • America Online (AOL) : 19.5 million shares.

Nasdaq Most Actives

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Sector Watch

Retail stocks were doing well, even if retail stores weren't. Following

Wal-Mart's

(WMT) - Get Report

lead, the

S&P Retail Index

gained 1.1% as many speculate the worst is over. And by worst, that's slowing sales, a disappointing Christmas season as low-margin sale items crowd the rack space usually meant for high-margin retail goods and the possibility that high ticket items have lost their luster along with investor portfolios.

Drugs. Get the nurse, we need drugs. In addition to Johnson & Johnson,

Merck

(MRK) - Get Report

was up 2.2% to $94.75, and

Pfizer

(PFE) - Get Report

gained 1.1% to $45.75. The

Amex Pharmaceutical Index

rose 1.7%.

Aerospace and defense stocks were uniformly strong.

Boeing

(BA) - Get Report

, a stalwart all year, rose 2.2% to $65.44, while

Northrop Grumman

(NOC) - Get Report

rose 0.8% to $78.56 and

Lockheed Martin

(LMT) - Get Report

gained 3% to $34.25.

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Bonds/Economy

Treasury notes and bonds were trading mostly lower as the market absorbed the latest economic data without much reaction. The number of people applying for unemployment insurance fell and last month's sales of previously owned homes were strikingly higher. Such optimism was however neutralized by a slumping attitude among consumers. The fact that many traders are home and those at work are unwilling to revise their portfolios at the year's close is another reason for the minimal response. Yields were up from their previous closing levels.

The benchmark 10-year

Treasury note was down 2/32 to 104 21/32, raising its yield to 5.13%.

In economic news, the

Mortgage Applications Survey

(

definition |

chart |

source

), the release of which had been delayed by a day, detected an increase in refinancing and a decrease in new mortgage activity as mortgage rates remained low. The Refinancing Index rose to 794.1, closer to its previous peak recorded in May 1999. The Purchase Index slipped to 278.2, its lowest level since February.

Initial jobless claims

(

definition |

chart |

source

) fell much more than expected. First-time claims for unemployment insurance fell to 333,000 from 356,000 the previous week. However, 18 of the states have turned in estimated data, so the revised number may be closer to the Reuters estimate of 351,000. The four-week average fell to 340,750 from 347,750.

Existing home sales

(

definition |

chart |

source

) rose more than expected to 5.22 million in November from 5 million in October. Economists polled by Reuters had forecast a drop to 4.9 million for the month. Low mortgage rates have been helping the housing market.

The

Consumer Comfort Index

(

definition |

chart ) remained at 27%, 11 points lower than its twelve-month high but not far below its 12-month average of 29%. Buyers lining up for last-minute gifts have kept the number steady.

The

Consumer Confidence Index

(

definition |

chart |

source

) fell more than forecasted to 128.3, its lowest level since December 1998. The Reuters poll had reflected similar sentiments in pegging it at 128.7. Economists watch this index closely due to its influence on consumer spending, which accounts for two-thirds of the

gross domestic product

(

definition |

chart |

source

).

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International

Currency trading extended recent trends. The euro strengthened against the dollar as perception of economic strength continues to shift toward Europe, while the Japanese yen dropped to a 16-month low against the greenback, on further concerns of economic weakness in Japan. The euro lately traded at $0.9255, while the dollar/yen was lately at 114.61.

European stocks were mildly stronger at the close. Paris'

CAC-40

gained 63.45 to 5920. London's

FTSE

was lately up 5 to 6223, and Frankfurt's

Xetra Dax

was up 5 to 6333.

Asian stocks ended mixed. Hong Kong's

Hang Seng

ended the day up 48.19 at 14,796.55, while Tokyo's

Nikkei 225

slipped 34.53 to 13,946.96

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